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Speculation says Seagate may try to buy Intel's stake in Micron venture

Seagate is fueling rumors in the NAND industry with analysts saying that they expect Seagate to acquire a NAND source to shore up its supply of NAND flash chips. The company is in preparation for its line of solid state drives (SSD) that it will have to produce within the next few years.

According some analysts, the only way to be really profitable in the SSD market is by having a secure and fixed source of NAND chips by building them yourself or by teaming up with a company that builds NAND directly.

This is the route that Intel took for its own line of SSDs -- that are undergoing in-house testing -- by teaming up with NAND flash maker Micron. Analyst Daniel Amir from the firm Lazard told eWeek that Seagate may be looking to buy out Intel’s 49% stake in the IM Flash Technologies joint venture Intel has with Micron.

Purchasing the 49% stake from Intel would reportedly cost Seagate anywhere from $1 billion to $2 billion. Avi Cohen from Avian Securities told eWeek, “However, I am skeptical of an Intel-Micron breakup. First of all, Micron would have to agree, which would mean the loss of a major partner -- Intel.”

If buying out Intel’s share of Micron isn’t an option, a purchase of SanDisk may be the route to go according to Cohen. Cohen says that right now SanDisk is the lowest cost source for NAND flash modules, making it a much better target for Seagate to acquire or partner with.

Seagate announced in May that it would have its own line of SSDs on the market next year. However, Seagate says it will not aim its products at the retail market; rather it will aim its SSDs at the enterprise market where the benefits of SSDs along with much larger budgets make the technology more attractive.

Cohen says, “I think the best thing for Seagate is to buy SanDisk and call it a day. Seagate has more expertise on the enterprise side, while SanDisk has more exposure on the retail side. SanDisk is the lowest-cost producer of NAND.”

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RE: Would Intel sell?
By Oregonian2 on 6/24/2008 12:35:37 PM , Rating: 1
They've been getting out of the Flash market and I recall that they've generally lost money in their Flash divisions. They've already spun out a lot of their flash (along with that "new" (1970's) technology non-volatile replacement) to a joint company with ST Micro.

As well as Intel's general mood of late to sell of sections of themselves.

Flash has not been a place to make money in recent years.

RE: Would Intel sell?
By mattclary on 6/24/2008 12:49:48 PM , Rating: 2
Seems like with everyone lusting after SSDs these days, their investment is about to pay off. :confused:

RE: Would Intel sell?
By exanimas on 6/24/2008 1:33:52 PM , Rating: 2
It is about to pay off, because it's potentially going to be bought buy a major HDD manufacturer at a time when they'll probably make more money selling it than they would if they continued using it themselves. I do think I am over simplifying a bit, but to me it makes sense. If they buyout happens, Intel makes between $1-2Bil, which is a decent sum of money even for a large company. IMO, it'll be a while before they start raking in enough profits from SSDs to equal that. They also mention that Micron would have to agree and would lose a major partner in Intel, but wouldn't it make more sense for them to partner with one of the biggest storage device manufacturers out there?

Like I said, I probably over simplified a bit, but then again I could be missing something, so that's just a breakdown of my point of view.

RE: Would Intel sell?
By Oregonian2 on 6/24/2008 3:20:40 PM , Rating: 3
Lust isn't necessarily profitable unless it's made "in the valley" in Southern California -- and even then it may not be.

Just Flash chip manufacturing is something with massive massive massive demand (of which SSD is just one application) but there's been little profits made on them (so ROI's have probably been pathetic). Having net revenue be greater than net expenses is more important and harder to accomplish than having people with lust for the product. This also is why Seagate's approach is what it is (non-retail target and trying to vertically integrate to help margins). They're attempting to make them profitable.

"Mac OS X is like living in a farmhouse in the country with no locks, and Windows is living in a house with bars on the windows in the bad part of town." -- Charlie Miller

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